App Stores, Mobile Data & the Dumb Pipe Threat

Ask Phil Asmundson what his duties are at Deloitte & Touche and be ready for an earful. As the vice chairman and national managing partner of Technology, Media & Entertainment and Telecommunications (TMT), Asmundson helps set the overall TMT strategy for the firm, advises clients directly, and serves as a member of the TMT Deloitte Editorial Committee. He is a regular speaker at industry events and is regularly quoted on emerging trends in the space.

Asmundson has spent 28 years at Deloitte & Touche and will speak at our upcoming conference, Mobilize 09. In the edited interview below, he discusses the impact of ever-increasing traffic on mobile networks and some of the ways carriers can avoid becoming dumb pipes.

Colin Gibbs: We’ve seen a dramatic surge in mobile data usage in North America in the last year or so as smartphones move into the mainstream and on-the-go computing gets legs. How are carriers’ attitudes toward mobile VoIP and other non-cellular technologies evolving due to the increasing traffic?

Phil Asmundson: I think we’re at an early stage of wireless transformation that will ultimately require collaboration across various networks. Carriers have traditionally been reluctant to circumvent their cellular networks, but the shift to data from voice will ultimately force them to offload traffic. I think we’ll get to the point where carriers don’t care whether a call is being carried on their network or on another network, and I think all-you-can-eat plans are going to help drive that.

Asmundson: I think they’re all in the early stages at this point. The carriers have always been the main point of contact, the control point for the customer, and it’s tough to relinquish some of that.

Gibbs: Earlier this year we read headlines detailing how mobile networks in Japan were struggling to deliver content to users. Are we seeing those kinds of network strains in the U.S. yet? If not, when should we expect them?

Asmundson: It really depends on how pricing goes. One of the things about smartphones is that they’re going to increase my usage so much that metering me, billing me on minutes, isn’t going to make any sense.

Carriers are quite reluctant to give up control, and I understand why — if I had invested billions of dollars to build out my network, I would want to see a return on that investment, too. But I will also say that carriers are extraordinarily concerned about the experience of the customer out there. The real impetus that will push this over the edge will be when you start to have failure of access. That may not be just around the corner; that may be here already. But to me this is a good problem. It doesn’t take a Ph.D. in math to conclude that voice ARPU is declining. If this is the case, the future of wireless must be focused on data traffic, not voice. That’s a big conversion to be done, which is why carriers are anxious to build out 4G networks.

Gibbs: I’m reading a lot about things like off-peak content delivery and the use of femtocells to minimize network traffic, but other than Wi-Fi, I have yet to see much real progress. How important will those kinds of solutions be in the next few years? What other kinds of potential solutions have you seen?

Asmundson: Ultimately, what we’re facing is that the interface between various wireless technologies will become very important. I personally believe that as you start to get into ultraband, ultimately we’re going to see a world where my device will communicate with networks in real time. It will look at many different attributes including signal strength, device type, congestion — it will look at that in real time, and it will determine which technology is best suited to deliver that to me.

Gibbs: It seems that’s beginning to happen on very high-end, enterprise-focused mobile computers. But how close are we to seeing that with more consumer-targeted phones?

Asmundson: I think we’re years from seeing it because it requires a whole new revenue model. Media is really interesting — if you get a dollar of media revenue you can watch how it’s sliced and diced up (among multiple partners). That’s how it would have to happen in telecom. This would be something that would be handing off in real time, and that would require new revenue agreements.

Gibbs: When will we see mobile broadband consumer services being deployed in any real way?

Asmundson: We have to get LTE and WiMAX first, so in any meaningful way we’re looking at four to six years. I think the economic downturn sure put a downturn on that, the availability of funds, because let’s face it: It’s expensive.

Gibbs: What tools can carriers leverage as they fight the war against becoming dump pipes?

Asmundson: I think there are a lot of revenue opportunities that go beyond the pipe, and maybe that’s the next generation of telcos. As you start to move more and more things that are personal to you into the cloud, there is the question of who’s going to store it for you. Who’s going to back it up? Who’s going to secure your privacy? I think there is a lot of opportunity for carriers who have huge data centers. They haven’t done an awful lot in that area — I have one case I can’t talk about — but there are some movements from carriers who are trying to get more aggressive.